Expense Management: The Complete Guide for 2022-2023

Better optimized expense management and a sound expense management system ensure that your business runs efficiently and is profit-making.

Introduction

Expense management is a process of managing the financial resources of a company. It includes allocating, controlling, and monitoring expenses classified as fixed or variable. Fixed expenses are those that do not change much over time, while variable expenses are those that do change based on factors like sales volume or product demand.

Companies use expense management to ensure adequate funding for their operations. It also helps businesses make sure that they are spending money in ways that align with their goals and objectives and their long-term growth plans.

Using an expense management software or an app, can help companies manage their expenses by automating many of the processes associated with this task so they can focus on more important things like growing their business.

Expense management is an important aspect of business that helps you to keep track of your expenses and avoid unnecessary spending. In this article, we will discuss what expense management means and how you can use it in your organization.

What Is Meant by Expense Management?

An expense management system is a set of processes and procedures implemented within an organization to control expenses. 

Expense management refers to managing all costs incurred by an organization for its business operations. It includes cost analysis and controls (i.e., reduction), cost optimization (i.e., increase), cost distribution across different areas/divisions within an organization, etc.

The goal of expense management is to keep an eye on all expenses to ensure that they are used in the most efficient way possible. The process involves recording and analyzing all expenditures, which helps identify areas where costs could be reduced or reallocated; and also identifies ways to increase revenues.

Expense management is a process that includes the following steps:

1. Budgeting: This is the process of deciding how much money you want to spend on certain categories of expenses.

2. Tracking: This is the process used to follow up on whether or not those budgeted amounts were actually spent according to plan.

3. Analysis: This involves analyzing the results obtained from expense tracking so as to assess whether or not there were any deviations from what was planned in terms of costs incurred.

Expense management is important for companies of all sizes and is done in many ways. Some software applications can help automate the process and make it easier to manage.

Why Is Expense Management Important?

Expense management is important because it helps companies reduce expenses. It also helps them to meet their goals, whether to increase revenue or decrease expenses.

Companies get to make informed decisions about how they spend their money, which can make a significant difference in the long run. Expense management software can help you track your expenses and find ways to reduce them, which means you'll have more money left over at the end of each month or quarter.

Expense management is the process of managing expenses for a company, and it helps in budgeting, reporting, controlling, forecasting and compliance.

Budgeting: A good expense management system will help you to create accurate budgets for your business. You can use this information to plan future expenses, and it will help you stay within your budget limits.

Reporting: The reports generated by an effective expense management system can be used by managers to monitor performance across various departments or regions within their business. This allows them to identify any trends which may then be used when making decisions about future plans or investments into new products or services offered by the company.

Controlling: An effective expense management solution should provide reports that enable managers at different levels within an organization to access detailed information on how much money has been spent in each area so they can make adjustments as necessary.

Forecasting: An effective expense management solution should include functionality that enables users to create forecasts based on past data so they know what future costs might look like based on current trends. It is an important feature allowing managers to plan ahead and ensure they have enough money to cover future expenses.

Compliance: An effective expense management solution should work with existing accounting software so that it can automatically export all data for each transaction in order to ensure compliance with internal policies as well as any government regulations. This ensures that users don’t have to worry about manually entering data into multiple systems or worry about making mistakes when manually entering information into the wrong fields.

Types of Expense Management

Expense management is a process of managing expenses and ensuring they are within budget limits. There are two types of expense management:

Internal Expense Management: 

This type of expense management involves managing the costs for internal departments such as Human Resources, Information Technology (IT), etc. The main objective here is to control costs by increasing efficiency and reducing bottlenecks in these departments.

External Expense Management: 

This type involves managing the costs for external vendors, such as contractors or consultants who provide services to your company. It also includes managing vendor relationships and ensuring they deliver quality products/services at an acceptable price point while meeting the requirements outlined in their contracts with a business.

Process of Expense Management

The expense Management process is important in the lifecycle of any business. It is a way to track expenditures that employees, vendors, and contractors make. In this process, you can also analyze the data to understand what you're spending money on.

The expense management process flow can be divided into three main steps:

  • Prepare the documents for approval by a supervisor or manager, who will ensure that you have provided all necessary information and documentation before approving your expenses.
  • The employee should submit his/her expense report to their supervisor. They will then approve or deny it based on certain criteria, such as whether the employee followed company policy regarding business trips, expenses incurred, and how much money was spent overall (does not include personal items).
  • Once an expense report has been approved by management and processed through accounting, it is sent to payroll for payment within two days at most. However, if there are any issues with any item that was submitted in the first step (e.g., missing receipts), then it will take longer for everything to be processed through accounting. It is to ensure that employees get paid on time every month without any delays causing problems with their finances."

The process is fairly straightforward to understand, but a few things can cause confusion for employees who have not gone through it before. First, some companies require that employees submit their expense reports before they leave for business trips. However, this is not always the case, so it is important to check with your supervisor or manager before leaving on a trip to know what procedures need to be followed. Second, while most companies will reimburse you for airfare and hotel expenses, they often do not pay for food and other incidentals unless there is an emergency.

Third, if you are unsure what receipts should be submitted with your expense report, then it is best to ask your supervisor or manager before submitting it, so there are no delays in getting paid. 

Finally, some companies will not reimburse for personal expenses such as meals out with friends or entertainment unless there was a business purpose for the event. If you are unsure whether your company will pay for these types of expenses, then it is best to ask before submitting your expense report.

Expense Management Policy

An expense management policy should be clear and concise. It should clearly state what expense management is about, how employees are expected to manage their expenses, what the organization considers an acceptable way to manage expenses and what the consequences are if they fail to do so.

This policy must be communicated by your organization's Chief Executive Officer (CEO), who then ensures that all employees receive a copy of it. The CEO should also ensure that everyone understands it fully before sending them out on business trips or asking them to incur additional costs on behalf of your company or client.

The CEO must review this policy annually and update it as required based on changes in legislation and best practices in this area. However, you may want to consider updating it at more frequent intervals if there has been a new development in either law or practice since its last review.

The policy should also include a section that explains how your company will deal with inappropriate expenses. This should include what the consequences are for employees who fail to follow the policy, including disciplinary action up to and including termination of employment. Consider including information about how your organization will handle any issues arising from business trips or other travel-related expenses incurred while on the job.

The CEO should also make it clear that employees will be expected to submit their receipts for all expenses incurred on behalf of the company or client, which will be reviewed and approved by a supervisor before reimbursement is made. This section may also include information about what kinds of expenses are considered appropriate for reimbursement, as well as examples of inappropriate ones.

Expense Management Software

If you want to implement an expense management software system, there are a few things to consider. For example, the right software will make it easier for employees to submit expenses and be reimbursed. It should also be user-friendly so that employees don't have any trouble using it.

So, what is expense management software? Expense management software allows companies to track their employees' spending habits to reimburse their workers' expenses accurately. This type of program integrates with your company's existing accounting software so that all transactions are recorded properly. Some programs allow users to submit receipts electronically, while others only work with paper documents as well as electronic files saved on a computer or mobile phone device (such as an iPad). Expense management systems vary widely depending on how many features they offer. Some include everything from budgeting tools to instant messaging capabilities. In contrast, others may focus solely on adding travel-related charges after an employee returns home from business trips abroad.

If you're looking for a program that will help your company keep track of its expenses, it's important to find one that fits all of your unique needs. There are many different types of expense management software available today, so take some time to do some research before making a final decision.

Expense Management System

An expense Management System is a cloud-based software that helps you track and manage your business expenditures. It is designed to help you to manage and control your spending, so you can save money and increase profits for your company.

The system allows you to create a list of vendors and their details, including contact information, address, tax ID number, etc. You can also add an unlimited number of users and assign them different permissions. The system has a dashboard that displays all expenses made by each user in real-time.

An expense management system should be able to:

  • Track all your organization's expenses, including salaries, travel expenses, office supplies, etc.
  • Manage different types of accounts like fixed assets, revenue-generating accounts, etc.
  • Display charts that show how much you spent on different things over a period of time. The charts should display data in a monthly or annual format based on the user’s preference.
  • It should have dashboards that show all the important data on a single page. It should have a feature to create reports that can be exported in PDF format, Excel, or any other file format.
  • It should have an application that allows people to create, approve and manage expense accounts. It should be able to generate reports that show how much you spent on different things over a period of time.

Uses of Expense Management System

An expense management system is used to manage personal, business, and family expenses. It allows you to be more organized with your money.

If you are in charge of managing a company's finances or have employees needing help keeping track of their spending habits, this software will make it easy for them to use. It also allows them to learn how much they are spending on different things so they can try and reduce those costs in the future by finding cheaper alternatives or just paying less attention when going out with friends or colleagues at work events like lunch meetings.

The expense management system will help you keep track of all the money that goes out of your pocket, allowing you to make better decisions that will save you money in the long run. This is done by tracking how much gas each car uses and noting when maintenance is needed on each vehicle.

The software is also used to keep track of all your purchases, credit cards, or cash. This will give you an idea of how much money is being spent and where it goes.

Advantages of Expense Management System 

The Expense Management System (EMS) is an accounting system designed to help businesses manage their monetary transactions. The Expense Management System allows businesses to track expenses, including employee spending so that they can control their budgets and manage their cash flow.

Companies can save money by allowing employees to submit expense reports electronically. This eliminates the need for employees to submit paper receipts, which saves time and money.

Expense Management systems with instant communication feature provide real-time updates on expenses, which makes it easier for supervisors to review and approve expenses before they are paid out. The instant communication feature can also help ensure compliance with company policy or legal requirements by providing a record of all expenses being paid by the company.

Here are some of the key advantages of implementing an expense management system:

Reduction in frauds: Expense management software helps to reduce fraud by automating processes that previously required manual input and review. With a more streamlined process, you'll have fewer opportunities for employees to take advantage of loopholes or make mistakes. This means lower costs associated with compliance audits and less risk overall for your business.

More accurate data: Employees who previously had to fill out paper forms will now be able to do so digitally through their expense management system, which makes it easier for them and you, to track expenses accurately and quickly. You can also use this data to gain actionable insights into how much money is being spent on what types of items or services, how long those items take employees to complete their tasks (which allows you better predict project timelines), etc. It can help improve productivity throughout your organization overall as well as increase revenue from existing clients/customers by providing better service levels than competitors may provide theirs with older technology platforms like spreadsheets or Google Sheets available today at no cost whatsoever via web browsers like Chrome or Firefox.

Improved productivity: Employees can now spend more time working on projects rather than filling out paperwork and tracking expenses, which will allow them to complete their tasks faster and more efficiently. This means that you can expect to see a decrease in your workload as well as an increase in overall productivity among your staff.

Reduced costs: A cloud-based expense management system will not only allow you to track expenses more effectively than ever before, but it can also help reduce the cost of doing so: You will no longer have to pay for expensive office space or equipment that is only used during tax season, which means that as long as you are able to retain your clients/customers with your new platform, then you should be able to lower overhead costs substantially.

Improved compliance: If you are a business owner who is required to provide your employees with expense reports, then you know how difficult it can be for them to keep track of all their receipts. A cloud-based solution like Expense IQ can help alleviate this problem by allowing users to upload their receipts from anywhere in the world at any time."

Improved reporting: A cloud-based expense management system will allow you to access reports in real-time. Thus, instead of waiting until the end of the year to find out how much money was spent on business trips or lunches with clients, you can now see such information almost immediately.

Mobile optimization: If your staff travels frequently and needs access to their expenses from anywhere in the world, then you need to choose an expense management solution optimized for mobile devices and web browsers.

Improved security: Cloud-based solutions are more secure than those that run on your own server because they store data in multiple locations and encrypt it before sending it to those locations.

Reduced paperwork: The expense management system allows you to submit your expenses for reimbursement in a few simple steps. This means that there is no more need to print or fax receipts and no need to wait for reimbursement. In addition, since the entire process is digital, there will be less paperwork.

Conclusion

Now that you’ve read this guide on expense management, you should feel more confident in deploying the right expense management system for your business. Currently, there are numerous expense management solutions, but not all of them are created equal. As with any technology procurement, be sure the solution has the proper amount of functionality, can meet the unique needs of your business, and is backed by excellent post-sale support.

After determining your company's requirements, research your options and ask for demos. Be sure to consider all available possibilities before making a final choice. Zorp is an app platform that you can use to develop a tailored expense management app for your business without having to write a single line code.